Full Year 2015 Park24 Co Ltd Earnings Presentation
Tokyo Jul 23, 2020 (Thomson StreetEvents) -- Edited Transcript of Park24 Co Ltd earnings conference call or presentation Wednesday, December 16, 2015 at 6:30:00am GMT
TEXT version of Transcript
* Koichi Nishikawa
PARK24 Co., Ltd. - President & Representative Director
Koichi Nishikawa, PARK24 Co., Ltd. - President & Representative Director 
Ladies and gentlemen, good afternoon. My name is Nishikawa. Thank you very much for attending October 2015 financial results briefing meeting for Park24 Group despite your busy schedule.
So let me start about the outline of results that we have announced yesterday. First of all, let me confirm the numbers. FY 2015 net sales was JPY 179.69 billion. Year-over-year, it was 107.6%. Gross profit was JPY 46.7 billion; operating profit, JPY 18.73 billion; recurring profit, JPY 18.58 billion; net income, JPY 11.54 billion. In terms of recurring profit in 2013, we recorded JPY 19.5 billion. But in terms of the net income, due to our tax rate, et cetera, for FY 2015, we're able to have a record-high level of net income.
So in terms of the Parking Business, and this is a year-on-year comparison of the monthly recurring profit, so for the previous year and the year before that, the consumption tax hike impacted our performance. And after the consumption tax was raised, the Japanese economy slowed down, which led to a decrease in traffic volume, which in turn led to a decline in the utilization rate of the parking spaces.
So if we look at this chart, and if we look at the year-over-year trend in March 2014 onwards, from April 2014 to March 2015, so the consumption tax was 5% in the previous year and this year was 8%. So there's a 3% increase. This led to a year-over-year below previous year numbers. So February 2015 showed out-of-ordinary figures. But this was a rebound from the heavy snow in the previous year. So the utilization rate was low in the previous February.
As a result, from April 2015 onwards, year-over-year comparison will be based on the 8% consumption tax. You can see that from April onwards, all the months have exceeded the previous year. As our parking space prices are by the JPY 100 or by 5 or 10 minutes, we try to absorb the impact of the consumption tax hike by the revision of the overall price structure. But this was not sufficient, consequently led to a decline in sales. And then this led to decline in the recurring profit. I think the figure shows this.
Going to Page 4. This is the operating profit by business segment. FY 2015 for the Parking Business, JPY 23.044 billion; Mobility Business, JPY 2.843 billion. Total operating profit was JPY 25.887 billion, the cost was JPY 7.297 billion and consolidated recurring income was JPY 18.589 billion. Overall, operating profit was 104.9% year-over-year. If we look at by business, the Parking Business was 97.6% year-over-year. The Mobility Business year-over-year, it grew by 269.8% to be simply put. The Mobility Business growth offset the shortage of the Parking Business. And through this, we have been able to achieve the operating income that we have targeted.
Going to Page 5. This sets about the parking sites and parking spaces development. We have new parking sites of 1,697; ST, 1,382; TPS, 315; so total, 1,697. In terms of the number of parking spaces, 61,037; ST, 21,830; and TPS, 39,207. Initially, at the beginning of this fiscal year, in terms of our plans were for ST, 1,600 sites, 24,000 parking spaces; TPS, 400 sites and 44,000 parking spaces.
In terms of the development, it is slightly short of the plan. But actually, the bottom line was that this was strategical. Because in the second half of the year, especially in the fourth quarter. Because looking at the full year figures, we thought that accelerating the pace of development will have a negative impact on the profit. So it's not the case that we have completely gave up on development but decided to put a foot off the gas a bit. As a result, in terms of the number of sites, it was short by 200-plus. In terms of the spaces, it was shown by a little under 7,000 against the plan.
As I always say in this kind of meetings, we still have a lot of capacity for development. And we are focusing on the sales side of the development. So we could have developed more if we had accelerated the development. And we were confident to do that based on a past experience. So no major impact will be on our overall business despite the shortfall on the figures that are shown here. That is why I have explained about this in this manner.
Going to Page 6. This is the number of operating parking sites and parking spaces. The total number of parking sites is at 14,987; total number of parking spaces, 499,473. So it would have been better if these figures to be nice around the 15,000 and 500,000, respectively. But roughly speaking, we have 15,000 sites and 500,000 spaces. We're able to achieve this level, a figure for FY 2015.
Going to Page 7. This is our car sharing business, Times Car PLUS, and trend of the sales and operating profit. Net sales, JPY 14.43 billion, up JPY 4.04 billion year-over-year; operating profit, JPY 1.26 billion, up JPY 1.25 billion year-over-year. Net sales year-over-year was 138.9%. Operating profit for the previous year was very small.
So the initial plan was JPY 14.7 billion for sales. So in terms of net sales, it is JPY 270 million short against the plan. Gross profit was JPY 3.61 billion, JPY 310 million over our plan of JPY 3.3 billion. Operating profit was JPY 1.26 billion actual against a plan of JPY 500 million. Our net sales shortage means our sales per vehicle per day against our plan was short against our plan. But we were able to reduce the expense largely, leading to better-than-expected numbers against our plan.
Going to Page 8. This is Times Car PLUS number of vehicles and members trend. Total number of vehicles is 13,149 vehicles. This is a 3,000-plus increase year-over-year. Number of members is 549,058. This is the situation. So by increasing the number of car sharing vehicles, we have been able to expand our area. In terms of the prefectures, we have been able to increase 8 prefectures of our business areas. As of the end of October this year, we are now do business in 42 prefectures in terms of our car sharing business.
Going to Page 9. This is the net sales and expense per vehicle per month for our car sharing business. FY 2015 per sales per vehicle was JPY 102,300. The previous year was JPY 99,800. So per vehicle per month, we have been able to increase the sales by JPY 2,500. In terms of the expenses per vehicle, it was JPY 93,300. The previous year was JPY 99,600. So we have been able to reduce the expenses per vehicle by JPY 6,300 per month.
On the top of this slide, we have some comments. It says here that for the higher sales on weekdays due to the efforts to encourage use by corporate members. Another bullet point is the reduction in downtime hours. In terms of the corporate members, we have been able to increase the sales by 6.7% per vehicle per day. In terms of reduction of downtime overall, so this will be per vehicle per month, we have been able to reduce the downtime by 1 hour and 35 minutes.
On the other hand, on the expense side, the major impact came from lower fuel costs against our plan. Next impact will be measures to improve the fuel efficiency. For instance, we offer preferential services to members who drove mindful of the usage of fuel. Well, this means that by avoiding hitting the brakes suddenly or conducting sudden starts, it will be more fuel efficient. And all the vehicles in the car sharing service have telematics equipment. And we can look at the data at our center. So for the customers who conduct these type of driving methodologies, they will be able to upgrade the status as the membership.
And we have been proactively allocating fuel-efficient cars, such as hybrid cars or low-fuel consumption gas engine cars, in high utilization areas. This means that our overall fuel efficiency has improved. And overall, we have enhanced the vehicle management, which led to the reduction of operational cost by JPY 6,300 per vehicle per month. So through these initiatives, the car sharing business profit grew strongly against our initial plan for the year ending in October 2015.
On Page 10, these will be the new initiatives that we have conducted for FY 2015. First of all, in July this year, we established Times Innovation Capital Co., Ltd. The objective of this establishment is that if you consider the stage of a business development, we have already established our infrastructure to a certain level. In terms of parking spaces, we have 15,000 sites and 500,000 spaces nationwide. In terms of car sharing, we have 13,000 vehicles as infrastructure. And for -- we have over 20,000 rental cars nationwide. So going forward, we will, of course, further expand our fundamental infrastructure. But we have to think what kind of services should we provide on this infrastructure. And this will be the driver for the next growth phase.
And of course, we will realize new ideas that comes from internally. But if we look out in the world, new services and new changes, especially in the IT area, is coming out with furious speed. And by having alliances with these venture capitals, maybe we can bring to the market faster of what we want to do. So investing in these companies or venture capitals is one option that we can proactively do. So that is the objective of starting this company. So in terms of the budget, it's JPY 3 billion. And currently, we have set this up in July. And we are always searching for new investments and new partners.
Another initiative is the expansion of the installation of Times Tower. We have 278 Times Tower installed at Times parking sites. Well, Times Tower, the type of service that it provides is that, as you can see in this slide, a Times point can be exchanged to Times tickets at the parking sites. What used to be the case, they had to check the points on the Internet and you call us and then wait until the Times ticket was sent by mail.
This Times Tower, in the parking sites that has Times Tower, you'll be able to get the tickets at the site. And the installation is at a higher ratio at TPS parking sites. And you can exchange for coupons for stores of TPS parking sites. For example, AEON gift cards from AEON or Takashimaya will be offering Takashimaya gift cards. And Seven & I will have a common gift card coupon. So 10 types of coupons of stores of TPS parking sites can be exchanged on the sites. So going forward, we would like to increase the installation of the Times Tower and lock in our customers.
Going to Page 11. This is about our dividend payout ratio and dividend per share. So as we have announced the previous day, FY 2015 dividend, it will be a JPY 5 increase as JPY 55 per share. Initially, announcement is that it will be the same level as FY 2014 at JPY 50. But that said, in terms of our shareholder return, we have said that we will not retain excess cash. In terms of the increase of profit, we will pay it back to our shareholders through -- mainly through dividends. That is what we have always been saying. So for FY '15, we have been able to hit the profit plan as we have said. And internally, this is as we have planned. Our policy was to increase the dividend if profit target was achieved. So this is the reason why we have announced a JPY 5 increase of dividends. So that has been the outline of the performance of FY 2015.
And next, I would like to turn to the outlook of FY 2016. So net sales, JPY 192 billion; gross profit, JPY 51.5 billion; operating profit, JPY 21.2 billion; recurring profit, JPY 21 billion; and net income is JPY 13.5 billion would be the outlook. If we are able to achieve all of these targets, it means that we'll be able to generate a record-high level at all of the profit items. So this is the plan for FY 2016.
So this is the forecast for the operating profit by business segments. First of all, for the Parking Business, JPY 24,800 million will be the OP plan; Mobility Business, JPY 4.1 billion; total operating profit, JPY 28.9 billion of operating profit; and the cost is JPY 7.9 billion. The consolidated recurring income will be JPY 21 billion. So the year-over-year comparison is shown at the bar graph at the lower side of this bar graph, 111.6%, 107.6% and 144.2%, respectively.
So first of all, about the Parking Business, this is on Page 15. So in terms of the total number of parking sites, in terms of the newly developed parking sites, our plan is 1,700 sites. So out of it, ST will be 1,300 and TPS, 400 sites. The new developed spaces will be 63,500: ST, 19,500; and TPS, 44,400 spaces. If we'll be able to achieve these new developments, it means that on total, we have 15,987 number of parking sites and 531,473 parking spaces.
So in terms of the Parking Business, the major policy of this year is that from 2 years ago, we have started to further enhancement of area-based operations. Until 3 years ago, for instance, our Yokohama branch looked at the overall Kanagawa prefecture as its sales territory. And the Yokohama branch salespeople would say that they could develop anywhere in Kanagawa prefecture. So back at that time at the Yokohama branch, we had about 30-plus salespeople. And these salespeople could develop parking sites or parking spaces anywhere in Kanagawa. From 2 years ago, within each of the branches, we have divided the sales staff into teams with 3 sales staff and 1 female support staff. So we decided that the area team will look at by dividing our sales staff into teams. The reason why we took this initiative is that we wanted to enhance the area-based operation.
More than 20 years ago, our founder, who had actually started this business, always said that our sales staff should know about the property market of the area more than the local real estate agent. So very precise information is necessary to continue to develop parking sites. But for instance, for the sales staff of the Yokohama branch, if they can cover Kanagawa prefecture, they will have to grasp all of the property information in Kanagawa. So it's very difficult to do it by one person. But if you have a team of 3, they can cover Kawasaki city quite well. So from 2 years ago, we started this initiative nationwide.
In terms of this area team system, for instance, to give you an example, in the head office, we have the Tokyo West, Tokyo East and Tokyo Central sales staff working in the head office. The Tokyo East sales team took care of the east side of 23 wards. The Tokyo Central team took care of the west side of the 23 wards of Tokyo. And the Tokyo West team was in charge of outside the 23 wards. And they used to go to Tachikawa and Hachioji from our head office. They went to conduct their sales rounds, then came back to the head office. Then it would be better to have a sales office in Tachikawa. It will be more efficient.
And we are gradually shifting our sales team nationwide to the areas which they are actually conducting our business. And we're actively opening new sales offices. At the end of the previous fiscal year, we had 29 sales spaces. And at the beginning of this year, they increased to 34. Last month, we opened a new base in Kanagawa. In Kanagawa, due to the massive volumes of Yokohama office, we set up a separate office in Kanagawa. And as I said before, in order to improve operating efficiency, we have been deploying sales teams in each area. And we opened new offices in Asahikawa, Morioka, Kanazawa and at Nishiakashi. Previously, Asahikawa area has been covered by Sapporo team; Morioka was covered by Sendai; Kanazawa was covered by Kyoto; and Nishiakashi was covered by Kobe office. But now we opened new offices.
Typically, the sales office has 3 sales staffs. We can save the transportation cost and time of these staffs by opening new offices in each location. However, it is more important that in visiting landowners, these sales staffs can present their name cards with their address at the same region, and it makes difference. When they visit customers in Kanazawa, for example, with a name card of a Kyoto address, customers would feel that they don't belong to the region. But if the cards were with Kanazawa address, customers' response will be different. In this year and the next, we would continue to actively open sales bases and deploy most of staffs in respective location.
And we established corporate sales headquarters this year. Up until last year, there were dedicated departments for public and medical institutions. But we consolidated corporate sales business in each location with the headquarter. These corporate sales headquarters are mainly located in Tokyo and Osaka. And they are dedicated to cover large corporations, public institutions and hospitals.
Page 17 shows the major tasks in Parking Business. We have made cards for corporations more convenient. We have been issuing Times Business Card, TBC, over years. In terms of number of card contract, 413,075 cards have been issued. And in terms of number of contracts, we have contract with 65,797 companies. We currently bill through the company lump sum. And their employees can use their parking cashless. Corporate sales headquarters are actively selling this product.
We are making this TBC a multiservice card so that users can use car sharing and rent-a-car with the card. We had request from existing corporate customers with TBC to use car sharing and rent-a-car. And there were also growing demands by users of car sharing and the rent-a-car to use parking as well. We call the card 3-in-1 card in-house. We are already renewing the existing card into 3-in-1 card gradually. And for the new card, they incorporate functionality of 3-in-1 in all cards. And it depends on the demand of the customers whether it will be actually enabled as 3-in-1.
And we will promote e-money measures. Even among the individual customers, e-money penetration in settlement of parking fees has been increasing. And as more people are paying with e-money at convenience stores, we will promote e-money measures in Parking Business further. Number of e-money compatible business operators is shown as 25. And this shows the number of railway companies operating in each location under the different names. Today, 1,372 parking sites are e-money compatible. In future, we will make all parking sites e-money and credit card compatible, though we cannot specify the time frame at this moment. And in particular, we will strive to promote e-money measures this year.
Page 18 shows Times Car PLUS business forecast. Number of vehicles will increase to 16,000, up 3,000 year-on-year. Net sales will be JPY 18.5 billion and operating income will be JPY 2.4 billion. Basically, we expand vehicles in Times Car PLUS by those parking at Times. But last year, out of 13,149 as of the end of the year, about 1,000 cars have been parked at other monthly parking sites, in many cases, in large-scale monthly parking sites.
We'll continue to increase the vehicles by expanding Times parking sites and other parking sites as well. However, if the vehicles at other parking sites increase, the cost will naturally be increasing. And because if the vehicle is parked at Times parking sites, its cost is already borne by the Parking Business. Therefore, if the vehicles parked at the other parking sites increase excessively, that would push up costs. It means we need to hit the optimum balance so that the overall cost will be well controlled and we will see the increase of 3,000.
As for the content of net sales of JPY 18.5 billion and operating income of JPY 2.4 billion, please turn to Page 19. On the left top, it shows that net sales per vehicle, up JPY 3,500 per vehicle per month. In FY 2016, net sales per vehicle will increase by JPY 3,500 year-on-year and expenses per vehicle will be down by JPY 1,200. In FY '15, gross margin per vehicle was JPY 9,000. And it will increase to JPY 13,700 according to the plan of FY '16.
As for the mix of the new contract, last year, new contract was 3,000, adding to the existing 10,000 as of the end of the previous year. And this year, adding to the existing 13,000 of the previous year, there will be another additional 3,000. Therefore, the new contract will be proportionally smaller. Given that, increase of JPY 3,500 is not an easy target. But with the steady effort, I believe this will be fully achievable.
As for the expenses per vehicle, fuel costs will not deviate much from the current trend in our forecast. Accordingly, if the gasoline price turns to increase, it would give negative impact and vice versa. Though there are some uncertainties for the cost in the future, the reduction of JPY 1,200 is quite possible based on the current trend.
In our effort for Times Car PLUS, in addition to the cooperation with other monthly parking sites as mentioned, we are enhancing alliance with other industries. Most feasible case is the alliance with the convenience stores. We are working with FamilyMart and the Circle K Sunkus, talking with them on the use of their parking sites. Convenience stores are much interested in car sharing as well. We will offer to install parking facilities and launch car sharing business. Sometimes, we simply ask customers to allow the parking of cars but also make package proposals, including parking site business. This is what we did in the previous fiscal year. And now we will be more proactive to promote.
Slide 21 shows cooperation with other transportation systems. We already made announcement of this initiative. And this is the cooperation with Fukuoka City Transportation Bureau. This HAYAKAKEN is e-money operated by Transportation Bureau of Fukuoka City. And with this HAYAKAKEN, you can open the key of Times Car PLUS vehicles. So HAYAKAKEN serves as if it is the membership card of car sharing. With HAYAKAKEN, you can use car sharing and benefited by the subsequent smooth transition from subway to vehicles and others. Expecting mutual benefit, we and the transportation bureau are promoting this initiative. This was actually very well accepted. And we received a number of referrals on this case. Therefore, we will promote cooperation with other transportation systems.
This page shows various experiments. We often receive questions about drop-off service. We'd like to launch the drop-off service using 13,000 vehicles and allow the dropoff at any Times parking sites. But in reality, it is technically very difficult. In order to enable the dropoff at any Times parking sites, we need to keep some spaces open. And some operational difficulties are also anticipated. Considering the time and effort, it will be very difficult in practice. But in some limited area, it will be possible. And actually, we started the service using Toyota i-Road. So we will continue to be active in launching new drop-off service in limited area or with new mobility. In order to explore new potentials, we will actively participate in new experiments, joining hands with auto companies.
Page 23 shows CSR efforts. We provide Times lesson to teach parking skills, increase awareness for the users of the parking sites. The frequently raised issue is difficulty in entering and parking in the parking site of Times and the like. But it seems that some people lack the driving skills. And I realize that unless you practice more, you wouldn't be able to park smoothly. Therefore, we started Times lesson at Times parking site 2 years ago. So far, lesson was provided 183 times for approximately 1,400 participants. By providing the lesson free of charge, we aim to prevent accidents at parking sites. Another initiative is Parking Day, 9th of August, which we started almost 20 years ago. We continue to donate part of sales from parking sites on Parking Day to the Foundation for Orphans from Automotive Accident.
Page 24 is about governance. With the consent at the next General Shareholders' Meeting on 27th of January, we will make transition to a company with audit and the supervisory committee. At present, we have 3 auditors, 1 full-time auditor and 2 external auditors. We plan to submit the bills for the reelection of board members as usual and appointment of a new member, who was formally an auditor. And with this, the company will be the one with the audit and the supervisory committee. And for the first time as a group, we will have an outside director. So a bill for his nomination is also to be submitted.
Compliance department is established within the group. Previously, each company in the group had its own audit office. But now cross-sales and intercompany activities, including the services for Times Club members, have been increasing. So the compliance department in charge of the whole group of Park24 was established. With this structural change, the function of audit officer will strengthen further. And we aim to enhance the compliance comprehensively and thoroughly by establishing the department on November 1.
Page 25 shows dividend in FY '16. In FY '16, dividend payout will be JPY 60 per share, up JPY 5 year-on-year, as announced yesterday. As I mentioned before, the return to shareholders will be in line with the profit growth. And since we renewed a record-high profit this year, we will increase the return to shareholders in the form of dividend. We usually announce a dividend increase at the financial results briefing. So it is rather unusual to announce a dividend increase at the beginning of the year. But you can take the announcement of the dividend increase in FY '16 as a proof of our confidence.
Final slide shows the 3-year mid-term management plan of 2015 to '17, which was announced 2 years ago. FY '15 is the first year of the 3-year plan. And we were able to achieve the targets in the plan as mentioned at the beginning of the presentation. And I believe with this, the likelihood of achieving the mid-term plan target has somewhat improved. The greatest target in the mid-term plan is JPY 24 billion recurring profit in the final year of 2017.
This JPY 24 billion might look small from the gross perspective. But in April 2017, there will be another consumption tax hike of 2%. We incorporated the impact of 2% tax increase in the profit, deducting 2% from the assumed sales. In other words, without the tax increase of 2%, recurring profit could be JPY 26 billion and we consider the tax increase impact of JPY 2 billion. And our target recurring profit in 2017 is JPY 24 billion in that mid-term management plan.
With this, I conclude my presentation on the results of 2015 and the plan for 2016. Thank you very much for your attention.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]